If you hope to sell your business within the next ten years, there are certain factors to consider that might decrease your business valuation. If any of these elements are true about your business, work them out far in advance of begining to sell your business.
Here are five elements that could negatively impact the valuation of your business.
5 Elements that Could Decrease Your Business Valuation
1. Inaccurate or incomplete financials.
If your financials are not maintained completely and accurately, it may not only be difficult, but impossible for you to sell your business. Begin today to get them up-to-date and properly organized.
2. Unkempt physical appearance.
Whether or not customers visit your business on a regular basis, if it appears ill-kept and unprofessional, a buyer will assume this is a reflection of the entire business and may either back out of the deal or offer you a significantly reduced price.
3. Negative attitude of one or more of the sellers.
In a situation with more than one seller, everyone must be onboard with making the deal happen. This means that every party is willing to provide all the information requested and answer all questions. If one seller in a group is not, it can kill the entire deal.
4. Unclear or negative reason for selling.
If you are sick or nearing retirement age, then there is a logical reason for selling your business. Otherwise, be sure you can explain why you are selling or the buyer might assume business or industry decline, which will greatly lessen the valuation.
5. Large percentage of revenue from one or two clients.
One of the biggest mistakes you can make is to have a large concentration of your revenue with a few clients. To gain the highest valuation, ensure sure that no more than 20% of your revenue comes from any client, or ideally any single industry.